2022 (12) TMI 942 - AT - Income Tax

Intimation framed u/s 143(1) - Foreign tax credit denied - assessee had derived salary income from Australia with which Indian Government had entered into DTAA - HELD THAT - CIT(A) had chosen the convenient method to deny the said benefit to the assessee by going into the technical ground stating that intimation u/s 143(1) had lost its identity pursuant to section 154 order passed by Ld. AO. As per the provisions of the Act, against the intimation u/s 143(1) of the Act, the appeal shall lie to the CIT(A). CIT(A) need not take cognizance of section 154 proceedings which had happened subsequent to the filing of appeal. Though, the revised return in the instant case had been filed by the assessee beyond the time limit prescribed u/s 139(4) of the Act altogether with the revised Form-67, the grievance of the assessee had to be addressed on merits. We deem it fit and proper to remand this appeal to the file of AO to verify the veracity of the claim made by the assessee in the revised return and revised Form-67 in the interest of substantial justice to the assessee. We hold that the substantial justice would prevail over technical considerations. Accordingly, the ground raised by the assessee is allowed for statistical purposes.

Summary

Issues:
- Entitlement for foreign tax credit

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai concerned the entitlement of the assessee for foreign tax credit for the assessment year 2018-19. The primary issue was whether the assessee, an individual earning income from salaries, was eligible for foreign tax credit based on the income earned during a secondment to Australia. The assessee had filed the return of income claiming foreign tax credit of Rs. 3,55,960 under section 91 of the Income Tax Act, 1961, instead of section 90. The difference between sections 90 and 91 lies in the availability of Double Taxation Avoidance Agreements (DTAA) with the concerned countries. Since the assessee earned salary income from Australia, which had a DTAA with India, the correct provision for claiming foreign tax credit was section 90.

The assessee's rectification application under section 154 of the Act was rejected by the Assessing Officer (AO), leading to an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal, arguing that the intimation under section 143(1) merged with the order under section 154, and therefore, the appeal lost its individual identity. However, the Tribunal observed that the CIT(A) did not address the assessee's grievance on merits, focusing on technical grounds instead of the substantive issue of foreign tax credit entitlement. The Tribunal emphasized that substantial justice should prevail over technical considerations and decided to remand the appeal to the AO for verifying the claim made by the assessee in the revised return and Form-67. The Tribunal allowed the assessee to submit further evidence in support of its contentions, emphasizing the importance of addressing the grievance on its merits.

Ultimately, the Tribunal allowed the appeal for statistical purposes, highlighting the importance of ensuring substantial justice in tax matters. The decision aimed to uphold the rights of the assessee in claiming legitimate benefits under the law, emphasizing the need to address grievances on their substantive merits rather than technicalities.